CFPB Details Origination Exam Procedures, Reverse Mortgage Oversight

The Consumer Financial Protection Bureau today released its Examination Procedures for Mortgage Origination. The procedures will be used to examine and assess the activities of mortgage originators, including those who originate reverse mortgages.

The exam procedures, available on the CFPB’s website, include assessment of mortgage originators’ compliance across facets of the origination process including: Company Business Model; Advertising and Marketing; Loan Disclosures and Terms; Underwriting, Appraisals, and Originator Compensation; Closing; Fair Lending; and Privacy.

These procedures “are a field guide for CFPB examiners looking at mortgage originators in both the bank and nonbank sectors of the industry,” the agency said.

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A description and discussion of reverse mortgages is included in the procedures, with specific attention to risks to consumers. An examination of mortgage originators will include a review of product types, including reverse mortgages and what percentage of reverse mortgages falls under the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program.

Under “other risks to consumers” the bureau will examine whether a company offering reverse mortgage also offers other financial products, like an annuity or long-term care insurance, with the proceeds of the reverse mortgage. It will also assess whether the originator provides information on

  • “the costs and relative risks associated with reverse mortgages,”
  • “requirements to pay property taxes, insurance, utilities, maintenance, and other expenses after obtaining a reverse mortgage,”
  • information about the circumstances under which the borrower may be required to pay the loan in full;
  • and will assess  whether the entity has adequate safeguards against improper marketing of reverse mortgages to seniors who have medical or cognitive problems or in situations raising concerns about undue influence by third parties.

“The mortgage market cannot work well for consumers if the spotlight shines only on one part of it, while the rest is left in darkness,” said CFPB Director Richard Cordray. “Our supervision program will illuminate the entire marketplace by making nonbanks play by the same rules as the banks.”

Cordray was appointed to lead the CFPB last week through a recess appointment exercised by President Obama. The following day, he announced a plan for the agency’s oversight of non-bank lenders.

View the examination procedures for mortgage origination.

Written by Elizabeth Ecker

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  • “… and will assess whether the entity has adequate safeguards against improper marketing of reverse mortgages to seniors who have medical or cognitive problems or in situations raising concerns about undue influence by third parties.”  (Good catch, Elizabeth.)

    What does that mean?  How can general marketing avoid reaching those individuals?  That phrase needs explanation.  The CFPB is showing its lack of experience.

    If the CFPB means targeting those individuals, then few if any in the industry would not welcome such assessment.  But if not, how does one exclude such individuals in TV advertising or mailings?

     

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